UNITED STATES
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________________ to ________________
Commission File Number:
0-11412
AMTECH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Arizona | 86-0411215 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
131 South Clark Drive, Tempe, Arizona | 85288 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | ASYS | NASDAQ Global Select Market |
Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] ☒ Yes [ ] ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ X ] ☒ Yes [ ] ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large | ☐ | Accelerated | ☐ | ||
Non-Accelerated Filer | ☒ | Smaller Reporting Company | ☒ | ||
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]☐ No [X]
At May 5, 2023, there were outstanding 14,046,535 shares of Common Stock outstanding as of February 2, 2018: 14,894,129
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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2
Cautionary Statement Regarding Forward-Looking Statements
Our discussion and analysis in this Quarterly Report on Form 10-Q ("Quarterly Report"), our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 (the “2022 Form 10-K”), our other reports that we file with the Securities and Exchange Commission (the “SEC”), our press releases and in public statements of our officers and corporate spokespersons contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our or our officers’ current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current events. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. We have tried, wherever possible, to identify such statements by using words such as “may,” “plan,” “anticipate,” “seek,” “will,” “expect,” “intend,” “estimate,” “believe,” “continue,” “predict,” “potential,” “project,” “should,” “would,” “could,” “likely,” “future,” “target,” “forecast,” “goal,” “observe,” and “strategy” or the negative thereof or variations thereon or similar terminology relating to the uncertainty of future events or outcomes. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors. Some factors that could cause actual results to differ materially from those anticipated include, among others, future economic conditions, including changes in the markets in which we operate; changes in demand for our services and products; our revenue and operating performance; difficulties in successfully executing our growth initiatives; difficulties in executing on our strategic initiatives with respect to our material and substrate business segment; our ability to effectively integrate our acquisition of Entrepix, Inc., which we acquired in January 2023; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; the cyclical nature of the semiconductor industry; pricing and gross profit pressures; control of costs and expenses; risks associated with new technologies and the impact on our business; legislative, regulatory, and competitive developments in markets in which we operate; possible future claims, litigation or enforcement actions and the results of any such claim, litigation proceeding, or enforcement action; business interruptions, including those related to the COVID-19 pandemic, the potential impacts of the COVID-19 pandemic, including ongoing logistical and supply chain challenges, and any future pandemic on our business operations, financial results and financial position; the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, including any future Chinese government mandated shutdown in Shanghai; risks of future cybersecurity incidents; adverse developments affecting financial institutions, including bank failures; and other circumstances and risks identified in this Quarterly Report or referenced from time to time in our filings with the SEC. The occurrence of the events described, and the achievement of expected results, depend on many events, some or all of which are not predictable or within our control. These and many other factors could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf.
You should not place undue reliance on these forward-looking statements. We cannot guarantee that any forward-looking statement will be realized, although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report. Achievement of future results is subject to events out of our control, risks, uncertainties and potentially inaccurate assumptions. The 2022 Form 10-K listed various important factors that could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from historical results and expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf. These factors can be found under the heading “Item 1A. Risk Factors” in our 2022 Form 10-K and investors should refer to them as well as the additional risk factors identified in this Quarterly Report. Because it is not possible to predict or identify all such factors, any such list cannot be considered a complete set of all potential risks or uncertainties.
The Company undertakes no obligation to update or publicly revise any forward-looking statement whether as a result of new information, future developments or otherwise. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this paragraph. You are advised, however, to consult any further disclosures we make on related subjects in our subsequently filed Form 10-Q and Form 8-K reports and our other filings with the SEC. As noted above, we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under “Item 1A. Risk Factors” of our 2022 Form 10-K. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand it is not possible to predict or identify all such factors.
Unless the context indicates otherwise, the terms “Amtech,” the “Company,” “we,” “us” and “our” refer to Amtech Systems, Inc., an Arizona corporation, together with its subsidiaries.
3
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share data)
December 31, 2017 | September 30, 2017 | |||||||
Assets | (Unaudited) | |||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 52,696 | $ | 51,121 | ||||
Restricted cash | 9,913 | 24,640 | ||||||
Accounts receivable | ||||||||
Trade (less allowance for doubtful accounts of $1,473 and $866 at December 31, 2017, and September 30, 2017, respectively) | 24,365 | 22,519 | ||||||
Unbilled and other | 21,620 | 14,275 | ||||||
Inventories | 22,762 | 30,210 | ||||||
Vendor deposits | 5,180 | 11,806 | ||||||
Other | 2,310 | 2,542 | ||||||
Total current assets | 138,846 | 157,113 | ||||||
Property, Plant and Equipment - Net | 15,637 | 15,792 | ||||||
Intangible Assets - Net | 3,378 | 3,495 | ||||||
Goodwill - Net | 11,484 | 11,405 | ||||||
Investments | 2,588 | 2,615 | ||||||
Deferred Income Taxes - Long-Term | 200 | 200 | ||||||
Other Assets - Long-Term | 980 | 1,003 | ||||||
Total Assets | $ | 173,113 | $ | 191,623 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 20,483 | $ | 21,555 | ||||
Accrued compensation and related taxes | 7,422 | 7,592 | ||||||
Accrued warranty expense | 1,401 | 1,254 | ||||||
Other accrued liabilities | 2,918 | 2,056 | ||||||
Customer deposits | 19,328 | 48,784 | ||||||
Current maturities of long-term debt | 365 | 361 | ||||||
Deferred profit | 5,632 | 4,081 | ||||||
Income taxes payable | 1,608 | 286 | ||||||
Total current liabilities | 59,157 | 85,969 | ||||||
Long-Term Debt | 8,225 | 8,134 | ||||||
Income Taxes Payable - Long-Term | 6,802 | 7,037 | ||||||
Total Liabilities | 74,184 | 101,140 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity | ||||||||
Preferred stock; 100,000,000 shares authorized; none issued | — | — | ||||||
Common stock; $0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 14,876,430 and 14,710,591 at December 31, 2017 and September 30, 2017, respectively | 149 | 147 | ||||||
Additional paid-in capital | 127,015 | 125,564 | ||||||
Accumulated other comprehensive loss | (7,988 | ) | (8,529 | ) | ||||
Retained deficit | (20,247 | ) | (26,699 | ) | ||||
Total stockholders’ equity | 98,929 | 90,483 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 173,113 | $ | 191,623 |
|
| March 31, |
|
| September 30, |
| ||
Assets |
| (Unaudited) |
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 17,733 |
|
| $ | 46,874 |
|
Accounts receivable (less allowance for doubtful accounts of $314 and $114 at |
|
| 29,427 |
|
|
| 25,013 |
|
Inventories |
|
| 35,285 |
|
|
| 25,488 |
|
Other current assets |
|
| 4,416 |
|
|
| 5,561 |
|
Total current assets |
|
| 86,861 |
|
|
| 102,936 |
|
Property, Plant and Equipment - Net |
|
| 8,740 |
|
|
| 6,552 |
|
Right-of-Use Assets - Net |
|
| 12,448 |
|
|
| 11,258 |
|
Intangible Assets - Net |
|
| 12,563 |
|
|
| 758 |
|
Goodwill |
|
| 29,257 |
|
|
| 11,168 |
|
Deferred Income Taxes - Net |
|
| 87 |
|
|
| 79 |
|
Other Assets |
|
| 1,046 |
|
|
| 783 |
|
Total Assets |
| $ | 151,002 |
|
| $ | 133,534 |
|
|
|
|
|
|
| |||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
|
| ||
Accounts payable |
| $ | 7,556 |
|
| $ | 7,301 |
|
Accrued compensation and related taxes |
|
| 2,949 |
|
|
| 4,109 |
|
Other accrued liabilities |
|
| 2,815 |
|
|
| 1,771 |
|
Current maturities of finance lease liabilities and long-term debt |
|
| 2,202 |
|
|
| 107 |
|
Current portion of long-term operating lease liabilities |
|
| 2,771 |
|
|
| 2,101 |
|
Contract liabilities |
|
| 9,661 |
|
|
| 7,231 |
|
Income taxes payable |
|
| 712 |
|
|
| 6 |
|
Total current liabilities |
|
| 28,666 |
|
|
| 22,626 |
|
Finance Lease Liabilities and Long-Term Debt |
|
| 9,530 |
|
|
| 220 |
|
Long-Term Operating Lease Liabilities |
|
| 9,953 |
|
|
| 9,395 |
|
Income Taxes Payable |
|
| 2,445 |
|
|
| 2,849 |
|
Other Long-Term Liabilities |
|
| 111 |
|
|
| 76 |
|
Total Liabilities |
|
| 50,705 |
|
|
| 35,166 |
|
Commitments and Contingencies (Note 9) |
|
|
|
|
|
| ||
Shareholders’ Equity |
|
|
|
|
|
| ||
Preferred stock; 100,000,000 shares authorized; none issued |
|
| — |
|
|
| — |
|
Common stock; $0.01 par value; 100,000,000 shares authorized; shares |
|
| 140 |
|
|
| 140 |
|
Additional paid-in capital |
|
| 125,127 |
|
|
| 124,458 |
|
Accumulated other comprehensive loss |
|
| (967 | ) |
|
| (1,767 | ) |
Retained deficit |
|
| (24,003 | ) |
|
| (24,463 | ) |
Total Shareholders’ Equity |
|
| 100,297 |
|
|
| 98,368 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 151,002 |
|
| $ | 133,534 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Revenues, net of returns and allowances | $ | 73,611 | $ | 29,135 | ||||
Cost of sales | 53,274 | 20,692 | ||||||
Gross profit | 20,337 | 8,443 | ||||||
Selling, general and administrative | 10,580 | 6,996 | ||||||
Research, development and engineering | 1,991 | 1,627 | ||||||
Operating income (loss) | 7,766 | (180 | ) | |||||
Loss from equity method investment | (26 | ) | (143 | ) | ||||
Interest expense and other income, net | (48 | ) | 81 | |||||
Income (loss) before income taxes | 7,692 | (242 | ) | |||||
Income tax provision | 1,240 | 90 | ||||||
Net income (loss) | 6,452 | (332 | ) | |||||
Add: net loss attributable to noncontrolling interest | — | 279 | ||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Income (Loss) Per Share: | ||||||||
Basic income (loss) per share attributable to Amtech shareholders | $ | 0.44 | $(0.00) | |||||
Weighted average shares outstanding | 14,781 | 13,179 | ||||||
Diluted income (loss) per share attributable to Amtech shareholders | $ | 0.42 | $(0.00) | |||||
Weighted average shares outstanding | 15,298 | 13,179 |
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Revenues, net |
| $ | 33,310 |
|
| $ | 27,556 |
|
| $ | 54,868 |
|
| $ | 54,019 |
|
Cost of sales |
|
| 19,840 |
|
|
| 16,396 |
|
|
| 33,095 |
|
|
| 32,961 |
|
Gross profit |
|
| 13,470 |
|
|
| 11,160 |
|
|
| 21,773 |
|
|
| 21,058 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative |
|
| 11,434 |
|
|
| 6,765 |
|
|
| 20,624 |
|
|
| 13,851 |
|
Research, development and engineering |
|
| 1,517 |
|
|
| 1,800 |
|
|
| 2,910 |
|
|
| 3,372 |
|
Severance expense |
|
| — |
|
|
| — |
|
|
| 400 |
|
|
| — |
|
Operating income (loss) |
|
| 519 |
|
|
| 2,595 |
|
|
| (2,161 | ) |
|
| 3,835 |
|
Interest (expense) income and other, net |
|
| (261 | ) |
|
| 30 |
|
|
| (329 | ) |
|
| (53 | ) |
Income (loss) before income tax provision |
|
| 258 |
|
|
| 2,625 |
|
|
| (2,490 | ) |
|
| 3,782 |
|
Income tax (benefit) provision |
|
| (2,946 | ) |
|
| 660 |
|
|
| (2,950 | ) |
|
| 820 |
|
Net income |
| $ | 3,204 |
|
| $ | 1,965 |
|
| $ | 460 |
|
| $ | 2,962 |
|
Income Per Share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per basic share |
| $ | 0.23 |
|
| $ | 0.14 |
|
| $ | 0.03 |
|
| $ | 0.21 |
|
Net income per diluted share |
| $ | 0.23 |
|
| $ | 0.14 |
|
| $ | 0.03 |
|
| $ | 0.21 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 14,028 |
|
|
| 13,979 |
|
|
| 14,018 |
|
|
| 14,118 |
|
Diluted |
|
| 14,157 |
|
|
| 14,144 |
|
|
| 14,142 |
|
|
| 14,318 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in thousands)
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Net income (loss) | $ | 6,452 | $ | (332 | ) | |||
Foreign currency translation adjustment | 541 | (941 | ) | |||||
Comprehensive income (loss) | 6,993 | (1,273 | ) | |||||
Comprehensive loss attributable to noncontrolling interest | — | 375 | ||||||
Comprehensive income (loss) attributable to Amtech Systems, Inc. | $ | 6,993 | $ | (898 | ) |
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net income |
| $ | 3,204 |
|
| $ | 1,965 |
|
| $ | 460 |
|
| $ | 2,962 |
|
Foreign currency translation adjustment |
|
| 384 |
|
|
| 102 |
|
|
| 800 |
|
|
| 339 |
|
Comprehensive income |
| $ | 3,588 |
|
| $ | 2,067 |
|
| $ | 1,260 |
|
| $ | 3,301 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
(Unaudited)
(in thousands)
Three Months Ended December 31, | |||||||
2017 | 2016 | ||||||
Operating Activities | |||||||
Net income (loss) | $ | 6,452 | $ | (332 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 471 | 654 | |||||
Write-down of inventory | 41 | 33 | |||||
Capitalized interest | 143 | 190 | |||||
Deferred income taxes | (7 | ) | 31 | ||||
Non-cash share based compensation expense | 253 | 319 | |||||
Loss from equity method investment | 26 | 143 | |||||
Provision for (reversal of) allowance for doubtful accounts, net | 48 | (1,178 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Restricted cash | 14,885 | (2,425 | ) | ||||
Accounts receivable | (8,869 | ) | (3,600 | ) | |||
Inventories | 7,558 | 1,621 | |||||
Accrued income taxes | 1,087 | 239 | |||||
Vendor deposits and other assets | 6,974 | 725 | |||||
Accounts payable | (1,255 | ) | 78 | ||||
Customer deposits and accrued liabilities | (29,023 | ) | 584 | ||||
Deferred profit | 1,479 | (619 | ) | ||||
Net cash provided by (used in) operating activities | 263 | (3,537 | ) | ||||
Investing Activities | |||||||
Purchases of property, plant and equipment | (93 | ) | (86 | ) | |||
Proceeds from sale of property, plant and equipment | — | 1 | |||||
Net cash used in investing activities | (93 | ) | (85 | ) | |||
Financing Activities | |||||||
Proceeds from the exercise of stock options | 1,199 | 1 | |||||
Payments on long-term debt | (89 | ) | (160 | ) | |||
Borrowings on long-term debt | — | 21 | |||||
Net cash provided by (used in) financing activities | 1,110 | (138 | ) | ||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 295 | (257 | ) | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | 1,575 | (4,017 | ) | ||||
Cash and Cash Equivalents, Beginning of Period | 51,121 | 27,655 | |||||
Cash and Cash Equivalents, End of Period | $ | 52,696 | $ | 23,638 | |||
|
| Common Stock |
|
| Treasury Stock |
|
|
|
|
| Accumulated |
|
|
|
|
| Total |
| ||||||||||||||
|
| Shares |
|
| Par Value |
|
| Shares |
|
| Cost |
|
| Additional Paid- |
|
| Comprehensive |
|
| Retained |
|
| Shareholders' |
| ||||||||
Balance at September 30, 2021 |
|
| 14,304 |
|
| $ | 143 |
|
|
| — |
|
| $ | — |
|
| $ | 126,380 |
|
| $ | 14 |
|
| $ | (40,903 | ) |
| $ | 85,634 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 997 |
|
|
| 997 |
|
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 237 |
|
|
| — |
|
|
| 237 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 103 |
|
|
| — |
|
|
| — |
|
|
| 103 |
|
Repurchase of treasury stock |
|
| — |
|
|
| — |
|
|
| (291 | ) |
|
| (2,713 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,713 | ) |
Retirement of treasury stock |
|
| (291 | ) |
|
| (3 | ) |
|
| 291 |
|
|
| 2,713 |
|
|
| (2,122 | ) |
|
| — |
|
|
| (588 | ) |
|
| — |
|
Stock options exercised |
|
| 12 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| — |
|
|
| 69 |
|
Balance at December 31, 2021 |
|
| 14,025 |
|
|
| 140 |
|
|
| — |
|
|
| — |
|
|
| 124,430 |
|
|
| 251 |
|
|
| (40,494 | ) |
|
| 84,327 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,965 |
|
|
| 1,965 |
|
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 102 |
|
|
| — |
|
|
| 102 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 137 |
|
|
| — |
|
|
| — |
|
|
| 137 |
|
Repurchase of treasury stock |
|
| — |
|
|
| — |
|
|
| (143 | ) |
|
| (1,402 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
Retirement of treasury stock |
|
| (143 | ) |
|
| (1 | ) |
|
| 143 |
|
|
| 1,402 |
|
|
| (1,062 | ) |
|
| — |
|
|
| (339 | ) |
|
| — |
|
Stock options exercised |
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29 |
|
|
| — |
|
|
| — |
|
|
| 29 |
|
Balance at March 31, 2022 |
|
| 13,887 |
|
| $ | 139 |
|
|
| — |
|
| $ | — |
|
| $ | 123,534 |
|
| $ | 353 |
|
| $ | (38,868 | ) |
| $ | 85,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at September 30, 2022 |
|
| 13,994 |
|
| $ | 140 |
|
|
| — |
|
| $ | — |
|
| $ | 124,458 |
|
| $ | (1,767 | ) |
| $ | (24,463 | ) |
| $ | 98,368 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,744 | ) |
|
| (2,744 | ) |
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 416 |
|
|
| — |
|
|
| 416 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 164 |
|
|
| — |
|
|
| — |
|
|
| 164 |
|
Stock options exercised |
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34 |
|
|
| — |
|
|
| — |
|
|
| 34 |
|
Balance at December 31, 2022 |
|
| 14,003 |
|
|
| 140 |
|
|
| — |
|
|
| — |
|
|
| 124,656 |
|
|
| (1,351 | ) |
|
| (27,207 | ) |
|
| 96,238 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,204 |
|
|
| 3,204 |
|
Translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 384 |
|
|
| — |
|
|
| 384 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 174 |
|
|
| — |
|
|
| — |
|
|
| 174 |
|
Stock options exercised |
|
| 36 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
Balance at March 31, 2023 |
|
| 14,039 |
|
| $ | 140 |
|
|
| — |
|
| $ | — |
|
| $ | 125,127 |
|
| $ | (967 | ) |
| $ | (24,003 | ) |
| $ | 100,297 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
| Six Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Operating Activities |
|
|
|
|
|
| ||
Net income |
| $ | 460 |
|
| $ | 2,962 |
|
Adjustments to reconcile net income to net cash used in |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 1,887 |
|
|
| 864 |
|
Write-down of inventory |
|
| 517 |
|
|
| 115 |
|
Deferred income taxes |
|
| (3,172 | ) |
|
| — |
|
Non-cash share-based compensation expense |
|
| 338 |
|
|
| 240 |
|
Provision for allowance for doubtful accounts |
|
| 156 |
|
|
| 41 |
|
Other, net |
|
| — |
|
|
| (2 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable |
|
| 1,113 |
|
|
| (8,321 | ) |
Inventories |
|
| (4,631 | ) |
|
| (2,433 | ) |
Other assets |
|
| 2,215 |
|
|
| (788 | ) |
Accounts payable |
|
| (1,497 | ) |
|
| 1,407 |
|
Accrued income taxes |
|
| (1,192 | ) |
|
| 1,272 |
|
Accrued and other liabilities |
|
| (2,289 | ) |
|
| 331 |
|
Contract liabilities |
|
| 768 |
|
|
| 3,951 |
|
Net cash used in operating activities |
|
| (5,327 | ) |
|
| (361 | ) |
Investing Activities |
|
|
|
|
|
| ||
Purchases of property, plant and equipment |
|
| (976 | ) |
|
| (125 | ) |
Acquisition, net of cash and cash equivalents acquired |
|
| (35,498 | ) |
|
| — |
|
Net cash used in investing activities |
|
| (36,474 | ) |
|
| (125 | ) |
Financing Activities |
|
|
|
|
|
| ||
Proceeds from the exercise of stock options |
|
| 331 |
|
|
| 98 |
|
Repurchase of common stock |
|
| — |
|
|
| (4,115 | ) |
Payments on long-term debt |
|
| (412 | ) |
|
| (198 | ) |
Borrowings on long-term debt |
|
| 12,000 |
|
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 11,919 |
|
|
| (4,215 | ) |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and |
|
| 741 |
|
|
| 286 |
|
Net Decrease in Cash, Cash Equivalents and Restricted Cash |
|
| (29,141 | ) |
|
| (4,415 | ) |
Cash and Cash Equivalents, Beginning of Period |
|
| 46,874 |
|
|
| 32,836 |
|
Cash, Cash Equivalents and Restricted Cash, End of Period |
| $ | 17,733 |
|
| $ | 28,421 |
|
Supplemental Cash Flow Information: |
|
|
|
|
|
| ||
Income tax (payments) refunds, net |
| $ | (1,529 | ) |
| $ | 250 |
|
Interest paid |
| $ | 94 |
|
| $ | 123 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED DECEMBERMARCH 31, 20172023 AND 2016
(UNAUDITED)
1. Basis of Presentation and Significant Accounting Policies
Nature of Operations and Basis of Presentation
– Amtech Systems, Inc. (theWe serve niche markets in industries that are experiencing rapid technological advances, and which historically have been very cyclical. Therefore, our future profitability and growth depend on our ability to develop or acquire and market profitable new products and on our ability to adapt to cyclical trends.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), and consequently do not include all disclosures normally required by accounting principles generally accepted in the United States of America.America (“GAAP”). In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to present fairly our financial position, results of operations and cash flows. Certain information and note disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. The condensed consolidated balance sheet at September 30, 2022, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K as amended, for the fiscal year ended September 30, 2017.
Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending or ended September 30, and the associated quarters, months, and periods of those fiscal years.
The consolidated results of operations for the three and six months ended DecemberMarch 31, 2017,2023, are not necessarily indicative of the results to be expected for the full fiscal year.
In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak became increasingly widespread, including in all of the markets in which we operate. We continue to monitor the impact of COVID-19 on all aspects of our business. We are a company operating in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with federal guidelines and with foreign government, state and local orders to date, we have continued to operate across our footprint throughout the COVID-19 pandemic. There remain many unknowns and we continue to monitor the expected trends and related demand for our products and services and have and will continue to adjust our operations accordingly.
On March 28, 2022, the Chinese government issued a mandatory shutdown in Shanghai, the location of one of our manufacturing facilities. The factory was allowed to partially reopen in May 2022 and was fully reopened on June 1, 2022. Upon reopening on June 1, 2022, the factory was able to operate at near full capacity for the entire month of June. We were able to make up the shipments missed in the fourth quarter of fiscal 2022 and are now operating at normal capacity levels. Additionally, given the uncertainty surrounding the COVID-19 pandemic and the emergence of variations thereof, there can be no assurance that this facility will be allowed to remain open on a consistent basis in the future.
9
Principles of Consolidation
– The consolidated financial statements include the accounts of the Company and our wholly-ownedUse of Estimates
– The preparation of consolidated financial statements in conformity withRestricted Cash – Restricted cash includes collateral for bank guarantees required by certain customers from whom deposits have been received in advance of shipment. Our restricted cash at March 31, 2022 was $0.5 million.
Intangible Assets– Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), finite-lived intangible assets are stated at acquisition-date fair value. Intangible assets are amortized using the straight-line method over their estimated useful life. We review product and service sales contracts with multiple deliverablesregularly perform reviews to determine if separate unitsfacts and circumstances exist which indicate that the useful lives of accountingour intangible assets are present. Where separate units of accounting exist, revenue allocated to delivered items is the lower of the relative selling price of the delivered items in the sales arrangementshorter than originally estimated or the portioncarrying amount of the selling price that isthese assets may not contingent upon performance of the service.
Goodwill – The Company accounts for goodwill under ASC 350. Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. Goodwill is not subject to amortization but is tested for impairment annually or when it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is concluded that there is a potential impairment, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit).
Long-lived assets – We review our long-lived assets for impairment at least annually in our fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additional information on impairment testing of long-lived assets can be found in Notes 1 and 11 of our Annual Report on Form 10-K for the year ended September 30, 2022.
Contract Liabilities – Contract liabilities are reflected in current liabilities on the Condensed Consolidated Balance Sheets as all performance obligations are expected to be satisfied within the next 12 months. Contract liabilities relate to payments invoiced or received in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations. Contract liabilities consist of customer deposits as of March 31, 2023 and September 30, 2022. Of the $7.2 million contract liabilities recorded at September 30, 2022, $0.8 million and $1.4 million was recorded as deferred profit in current liabilities. The components of deferred profit are as follows, in thousands:
December 31, 2017 | September 30, 2017 | ||||||
Deferred revenues | $ | 8,370 | $ | 6,822 | |||
Deferred costs | 2,738 | 2,741 | |||||
Deferred profit | $ | 5,632 | $ | 4,081 |
Warranty – A limited warranty is provided free of charge, generally for periods of 12 to 36 months to all purchasers of our new products and 2016, respectively,systems. Accruals are recorded for estimated warranty costs at the time revenue is recognized, generally upon shipment or acceptance, as determined under our revenue recognition policy. On occasion, we have been required and may be required in the future to provide additional warranty coverage to ensure that the systems are ultimately accepted or to maintain customer goodwill. While our warranty costs have historically been within our expectations and we believe that the amounts accrued for warranty expenditures are sufficient for all systems sold through March 31, 2023, we cannot guarantee that we will continue to experience a similar level of predictability with regard to warranty costs. In addition, technological changes or previously unknown defects in raw materials or components may result in more extensive and frequent warranty service than anticipated, which could result in an increase in our warranty expense. Our accrued warranty expense is $1.1 million at March 31, 2023 and $0.9 million at September 30, 2022. Our accrued warranty expense is included in other accrued liabilities on the Condensed Consolidated Balance Sheets.
Shipping Expense – Shipping and handling fees associated with outbound freight are expensed as incurred and included in selling, general and administrative expenses.
10
three months ended March 31, 2023 and development expenses2022, respectively, and grants earned, in thousands:
Three Months Ended | ||||||||
December 31, 2017 | December 31, 2016 | |||||||
Research, development and engineering | $ | 2,290 | $ | 1,830 | ||||
Grants earned | (299 | ) | (203 | ) | ||||
Net research, development and engineering | $ | 1,991 | $ | 1,627 |
Concentrations of Credit Risk
– Our customers consist ofAs of DecemberMarch 31, 2017,2023, two Semiconductor segment customers individually represented 36%19% and 12%12% of accounts receivable. As of September 30, 2017, two customers2022, one Semiconductor segment customer individually represented 24% and 11%12% of accounts receivable.
We maintain our cash and cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately 56%67% and 45%84% of total cash balances as of DecemberMarch 31, 20172023 and September 30, 2017,2022, respectively, are primarily invested in U.S. Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”).FDIC as well as a money market account. The remainder of our cash is maintained with financial institutions with reputable credit ratings in The Netherlands, France, China, the United Kingdom Singapore and Malaysia.
Refer to Note 911 to Condensed Consolidated Financial Statements for information regarding major customers, foreign sales and revenue in other countries subject to fluctuation in foreign currency exchange rates.
Impact of Recently Issued Accounting Pronouncements
In March 2016,October 2021, the Financial Accounting Standards Board (the “FASB”issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) issued, which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718).”Codification Topic 606. ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The amendments in this ASU are2021-08 is effective for annual periodsfiscal years beginning after December 15, 20162022 and for the interim periods therein. This new standard increases volatility in the statement of operations by requiring all excess tax benefits and deficiencies to be recognized as discrete income tax benefits or expenses in the statement of operations in the period in which they occur.early adoption is permitted. We adopted the new standardamendments in ASU 2021-08 as of October 1, 2017,2022, without a material impact on our unaudited condensed consolidated financial statements.
There were no other new accounting pronouncements issued or effective as of March 31, 2023 that had or are expected to have a material impact on our consolidated financial statements.
Correction of Immaterial Misstatements
During the preparation of the condensed consolidated financial statements for the period ended June 30, 2022, the Company identified certain immaterial misstatements related to the classification of sales discounts to distributors within our semiconductor reportable segment. The Company previously presented these sales discounts as part of selling, general and prospectively appliedadministrative expenses instead of as a reduction of revenues in its unaudited condensed consolidated statements of operations for the provisionsthree-month period ended December 31, 2021, and the three and six-month periods ended March 31, 2022, which resulted in this guidance requiring recognitionoverstatements of excess tax benefitsrevenue and deficitsselling, general and administrative expenses for those periods.
In accordance with Staff Accounting Bulletin No. 99, “Materiality,” the Company evaluated the misstatements and determined that the related impact was not material to the Company’s financial statements for any interim period. Accordingly, the Company revised the unaudited condensed consolidated statements of operations for the periods ended December 31, 2021 and March 31, 2022, including the related notes presented herein, as applicable. The misstatements did not impact operating income or net income in the statementcondensed consolidated statements of operations. Also, as a result ofoperations, or the adoption ofcondensed consolidated balance sheets or the new standard, we made an accounting policy election to recognize forfeitures as they occur and no longer estimate expected forfeitures. The provisions in this guidance requiring the use of a modified retrospective transition method would have required us to record a cumulative-effect adjustment in retained earnings as of October 1, 2017. On the basis of immateriality, we recorded such cumulative-effect adjustment as stock-based compensation in the first quarter of 2018 rather than adjusting retained earnings. Lastly, we applied the provisions of this guidance relating to classification on the statementcondensed consolidated statements of cash flows retrospectivelyfor any of those periods.
11
A summary of the corrections to previously reported condensed consolidated statements of operations is as follows:
|
| Six Months Ended March 31, 2022 |
| |||||||||
|
| As Reported |
|
| Adjustment |
|
| As Corrected |
| |||
Revenues, net |
| $ | 55,908 |
|
| $ | (1,889 | ) |
| $ | 54,019 |
|
Gross profit |
| $ | 22,947 |
|
| $ | (1,889 | ) |
| $ | 21,058 |
|
Selling, general and administrative |
| $ | 15,740 |
|
| $ | (1,889 | ) |
| $ | 13,851 |
|
|
| Three Months Ended March 31, 2022 |
| |||||||||
|
| As Reported |
|
| Adjustment |
|
| As Corrected |
| |||
Revenues, net |
| $ | 28,579 |
|
| $ | (1,023 | ) |
| $ | 27,556 |
|
Gross profit |
| $ | 12,183 |
|
| $ | (1,023 | ) |
| $ | 11,160 |
|
Selling, general and administrative |
| $ | 7,788 |
|
| $ | (1,023 | ) |
| $ | 6,765 |
|
|
| Three Months Ended December 31, 2021 |
| |||||||||
|
| As Reported |
|
| Adjustment |
|
| As Corrected |
| |||
Revenues, net |
| $ | 27,329 |
|
| $ | (866 | ) |
| $ | 26,463 |
|
Gross profit |
| $ | 10,764 |
|
| $ | (866 | ) |
| $ | 9,898 |
|
Selling, general and administrative |
| $ | 7,952 |
|
| $ | (866 | ) |
| $ | 7,086 |
|
2. Long-Term Debt
Our finance lease liabilities and long-term debt consists of the following, in thousands:
|
| March 31, |
|
| September 30, |
| ||
Senior revolving credit facility |
| $ | — |
|
| $ | — |
|
Term loan |
|
| 11,620 |
|
|
| — |
|
Finance leases |
|
| 112 |
|
|
| 147 |
|
Equipment finance |
|
| — |
|
|
| 180 |
|
Total |
|
| 11,732 |
|
|
| 327 |
|
Less: current portion of finance lease liabilities |
|
| (2,202 | ) |
|
| (107 | ) |
Finance Lease Liabilities and Long-Term Debt |
| $ | 9,530 |
|
| $ | 220 |
|
Loan and Security Agreement
On January 17, 2023, we entered into a Loan and Security Agreement (the “LSA”) by and among Amtech, its U.S. based wholly owned subsidiaries Bruce Technologies, Inc., a Massachusetts corporation, BTU International, Inc., a Delaware corporation, Intersurface Dynamics, Incorporated, a Connecticut corporation, P.R. Hoffman Machine Products, Inc., an Arizona corporation, and Entrepix, Inc., (collectively the “Borrowers”) and UMB Bank, N.A., national banking association (the “Lender”). The LSA provides for (i) a term loan (the “Term Loan”) in the amount of $12.0 million maturing January 17, 2028, and (ii) a revolving loan facility (the “Revolver”) with an availability of $8.0 million maturing January 17, 2024. The recorded amount of the Term Loan has an interest rate of 6.38%. The Revolver has a floating per annum rate of interest equal to the Prime Rate, adjusted daily. Under the LSA, we are required to pay a non-utilization fee equal to 0.125% of any unused portion of the Revolver in excess of any letter of credit obligations. As of March 31, 2023, no material effect amounts were borrowed against the Revolver.
The Term Loan and Revolver are secured by a first priority lien on substantially all of the Borrowers’ assets (other than certain customary excluded assets) and the LSA contains customary events of default, representations and warranties, and covenants that restrict the Borrowers’ ability to, among other things, incur additional indebtedness, other than permitted indebtedness, enter into mergers or acquisitions, sell or otherwise dispose of assets, or pay dividends, subject to customary exceptions.
The LSA additionally contains financial covenants such that, as of the end of each of their fiscal quarters, beginning March 31, 2023, the Borrowers must maintain (i) a ratio of consolidated debt owed to Lender to consolidated EBITDA
12
(as defined in the LSA) for such fiscal quarter, of not greater than 1.50 to 1.00, through December 31, 2024, based on a building 4 quarters (as described in the LSA), and then 1.00 to 1.00 each fiscal quarter thereafter, (ii) a ratio of (a) the total for such fiscal quarter of EBITDAR (as defined in the LSA) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance Capital Expenditures (as defined in the LSA) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the LSA) plus (2) required payments of principal on Debt (as defined in the LSA) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a building 4 quarters (as described in the LSA), and (iii) a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $35.0 million.
Finance Lease Obligations
Our finance lease obligations totaled $0.1 million as of March 31, 2023 and September 30, 2022.
The current and long-term portions of our finance leases are included in the current and long-term portions of finance lease liabilities and long-term debt in the table above and in our Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022. Further, see Note 6 for additional information.
3. Acquisition
Entrepix Merger
On January 17, 2023 (the “Closing Date”), the Company acquired 100% of the issued and outstanding shares of capital stock of Entrepix, Inc., an Arizona corporation (“Entrepix”), which primarily manufactures chemical mechanical polishing (“CMP”) technology, through a reverse triangular merger. Entrepix’s CMP technology portfolio and water cleaning equipment will complement our existing substrate polishing and wet process chemical offerings. Pursuant to the terms and conditions of the Agreement and Plan of Merger dated January 17, 2023 (the “Merger Agreement”), Emerald Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”) merged with and into Entrepix (the “Merger”), resulting in Entrepix surviving the Merger and becoming a wholly-owned subsidiary of the Company (the “Acquisition” or “Transaction”).
On the Closing Date, in connection with the Merger Agreement and in contemplation of the Transaction, the Company entered into a Loan and Security Agreement with UMB Bank, N.A., under which the Lender provided the Company with (i) a $12.0 million term loan maturing January 17, 2028, and (ii) an $8.0 million revolving loan facility maturing January 17, 2024 (see Note 2). The proceeds of the Term Loan were used to partially fund the Transaction.
The Acquisition is accounted for using the acquisition method of accounting for business combinations under FASB Accounting Standard Codification Topic No. 805, Business Combinations (“ASC 805”), with Amtech representing the accounting acquirer under this guidance.
Summary of Consideration Transferred
The total consideration for the Acquisition was $39.8 million, consisting of $35.8 million cash flows.consideration to the sellers and $4.0 million cash paid for debt and Entrepix transaction costs.
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Such assets include synergies the Company expects to achieve, such as deeper penetration into an overlapping customer base, complementary product offerings, and cost redundancy reductions. In accordance with the measurement principles in FASB Accountings Standard Codification Topic No. 820, Fair Value Measurement, the purchase consideration for the Acquisition has been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including a residual amount of goodwill, none of which is deductible for tax purposes. Amtech’s acquisition costs incurred were $2.0 million for the six months ended March 31, 2023, and were recorded as “General and administrative expenses” in the accompanying Condensed Consolidated
13
Statements of Operations. The following table summarizes the provisional fair values assigned to identifiable assets acquired and liabilities assumed, in thousands:
Fair value of total cash consideration transferred |
| $ | 39,787 |
|
Estimated fair value of identifiable assets acquired and liabilities assumed: |
|
|
| |
Cash and cash equivalents |
| $ | 4,289 |
|
Accounts receivable, net |
|
| 5,681 |
|
Inventories |
|
| 5,683 |
|
Other current assets |
|
| 179 |
|
Property, plant, and equipment |
|
| 2,051 |
|
Right-of-use assets |
|
| 2,246 |
|
Intangible assets |
|
| 12,800 |
|
Goodwill |
|
| 18,089 |
|
Other assets |
|
| 31 |
|
Total assets acquired |
|
| 51,049 |
|
Accounts payable |
|
| 1,574 |
|
Other accrued liabilities |
|
| 1,170 |
|
Contract liabilities |
|
| 1,662 |
|
Income taxes payable |
|
| 1,447 |
|
Current portion of long-term operating lease liabilities |
|
| 515 |
|
Long-term operating lease liabilities |
|
| 1,730 |
|
Deferred tax liability |
|
| 3,164 |
|
Total liabilities assumed |
|
| 11,262 |
|
Net assets acquired |
| $ | 39,787 |
|
The establishment of the allocation to goodwill requires the extensive use of accounting estimates and management judgement. In accordance with ASC 805, the Company has up to one year from the acquisition date (referred to as the measurement period) to account for changes in the fair values of the identifiable assets acquired and the liabilities assumed in the acquired entity. As of the issuance of the condensed consolidated financial statements for the period ended March 31, 2023, the Company has not finalized its calculation of consideration transferred, intangible assets, deferred tax assets or liabilities, income taxes payable, and the resulting adjustments to goodwill. The calculation of consideration is pending the finalization of working capital adjustments. Intangible assets will be finalized pending management’s final review of the third party valuation report, and the tax-related items will be finalized pending a consolidated analysis of the combined tax attributes of the Acquisition. If a change in any of these items is identified during the measurement period, the Company will record the cumulative impact of measurement period adjustments in the period the adjustment is identified.
The fair value associated with acquired intangible assets and their associated weighted-average amortization periods consist of the following, in thousands:
|
| Classification of Amortization |
| Amount |
|
| Weighted-Average | |
Developed technology |
| Cost of sales |
| $ | 5,900 |
|
| 5.0 years |
Customer relationships |
| Selling, general and administrative |
|
| 2,800 |
|
| 10.0 years |
Backlog |
| Selling, general and administrative |
|
| 2,100 |
|
| 1.0 year |
Trade names |
| Selling, general and administrative |
|
| 1,800 |
|
| 10.0 years |
Noncompetition agreements |
| Selling, general and administrative |
|
| 200 |
|
| 5.0 years |
Total intangible assets |
|
|
| $ | 12,800 |
|
| 6.1 years |
Unaudited Pro Forma Financial Information
Entrepix is included in the Company’s consolidated results beginning January 17, 2023. Total revenues and net loss attributable to Entrepix for the period from January 17, 2023 to March 31, 2023 were $6.3 million and $0.1 million, respectively.
14
The following unaudited pro forma financial information presents the combined results of operations of Amtech and Entrepix, in thousands, as if the acquisition occurred on October 1, 2021. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been no other material changesachieved if the acquisition had taken place on the date indicated or additionsof results that may occur in the future.
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Revenues, Net |
| $ | 34,623 |
|
| $ | 33,725 |
|
| $ | 63,778 |
|
| $ | 65,825 |
|
Net Income (Loss) |
| $ | 4,285 |
|
| $ | (35 | ) |
| $ | 1,149 |
|
| $ | 642 |
|
The unaudited pro forma financial information presented above include the following adjustments:
3 Months Ended March 31, 2023 and March 31, 2022
6 Months Ended March 31, 2023 and March 31, 2022
The unaudited pro forma financial statements.information includes adjustments to align accounting policies, which were materially similar to the Company’s accounting policies. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company in the unaudited pro forma financial information presented.
4. Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued. Dilutive potential common shares include outstanding restricted stock units (“RSUs”) and stock options. In the case of a net loss, diluted earnings per share is calculated in the same manner as basic EPS.
For the three and six months ended
15
A reconciliation of the components of the basic and diluted EPS calculations follows, in thousands, except per share amounts:
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 3,204 |
|
| $ | 1,965 |
|
| $ | 460 |
|
| $ | 2,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average shares used to compute basic EPS |
|
| 14,028 |
|
|
| 13,979 |
|
|
| 14,018 |
|
|
| 14,118 |
|
Dilutive potential common shares due to stock |
|
| 128 |
|
|
| 165 |
|
|
| 124 |
|
|
| 200 |
|
Dilutive potential common shares due to RSUs (1) |
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Weighted-average shares used to compute diluted EPS |
|
| 14,157 |
|
|
| 14,144 |
|
|
| 14,142 |
|
|
| 14,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per basic share |
| $ | 0.23 |
|
| $ | 0.14 |
|
| $ | 0.03 |
|
| $ | 0.21 |
|
Net income per diluted share |
| $ | 0.23 |
|
| $ | 0.14 |
|
| $ | 0.03 |
|
| $ | 0.21 |
|
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Basic Income (Loss) Per Share Computation | ||||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Weighted Average Shares Outstanding: | ||||||||
Common stock | 14,781 | 13,179 | ||||||
Basic income (loss) per share attributable to Amtech shareholders | $ | 0.44 | $(0.00) | |||||
Diluted Income (Loss) Per Share Computation | ||||||||
Net income (loss) attributable to Amtech Systems, Inc. | $ | 6,452 | $ | (53 | ) | |||
Weighted Average Shares Outstanding: | ||||||||
Common stock | 14,781 | 13,179 | ||||||
Common stock equivalents (1) | 517 | — | ||||||
Diluted shares | 15,298 | 13,179 | ||||||
Diluted income (loss) per share attributable to Amtech shareholders | $ | 0.42 | $(0.00) |
5. Inventories
The components of inventories are as follows, in thousands:
|
| March 31, |
|
| September 30, |
| ||
Purchased parts and raw materials |
| $ | 22,994 |
|
| $ | 15,377 |
|
Work-in-process |
|
| 7,291 |
|
|
| 6,146 |
|
Finished goods |
|
| 5,000 |
|
|
| 3,965 |
|
|
| $ | 35,285 |
|
| $ | 25,488 |
|
December 31, 2017 | September 30, 2017 | ||||||
Purchased parts and raw materials | $ | 13,628 | $ | 14,789 | |||
Work-in-process | 5,806 | 11,078 | |||||
Finished goods | 3,328 | 4,343 | |||||
$ | 22,762 | $ | 30,210 |
6. Leases
The following table provides information about the financial statement classification of our lease balances reported within the Condensed Consolidated Balance Sheets, in thousands:
|
| March 31, |
|
| September 30, |
| ||
Assets |
|
|
|
|
|
| ||
Right-of-use assets - operating |
| $ | 12,448 |
|
| $ | 11,258 |
|
Right-of-use assets - finance |
|
| 113 |
|
|
| 149 |
|
Total right-of-use assets |
| $ | 12,561 |
|
| $ | 11,407 |
|
Liabilities |
|
|
|
|
|
| ||
Current |
|
|
|
|
|
| ||
Operating lease liabilities |
| $ | 2,771 |
|
| $ | 2,101 |
|
Finance lease liabilities |
|
| 71 |
|
|
| 71 |
|
Total current portion of long-term lease liabilities |
|
| 2,842 |
|
|
| 2,172 |
|
Long-term |
|
|
|
|
|
| ||
Operating lease liabilities |
|
| 9,953 |
|
|
| 9,395 |
|
Finance lease liabilities |
|
| 41 |
|
|
| 76 |
|
Total long-term lease liabilities |
|
| 9,994 |
|
|
| 9,471 |
|
Total lease liabilities |
| $ | 12,836 |
|
| $ | 11,643 |
|
16
The following table provides information about the financial statement classification of our lease expenses reported in the Condensed Consolidated Statements of Operations, in thousands:
|
|
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
Lease cost |
| Classification |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Operating lease cost |
| Cost of sales |
| $ | 688 |
|
| $ | 198 |
|
| $ | 1,149 |
|
| $ | 395 |
|
Operating lease cost |
| Selling, general and administrative |
|
| 202 |
|
|
| 86 |
|
|
| 379 |
|
|
| 170 |
|
Operating lease cost |
| Research, development and engineering |
|
| 4 |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
Finance lease cost |
| Cost of sales |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
Finance lease cost |
| Selling, general and administrative |
|
| 18 |
|
|
| 19 |
|
|
| 36 |
|
|
| 35 |
|
Short-term lease cost |
| Cost of sales |
|
| 9 |
|
|
| — |
|
|
| 17 |
|
|
| — |
|
Total lease cost |
|
|
| $ | 922 |
|
| $ | 304 |
|
| $ | 1,590 |
|
| $ | 602 |
|
Future minimum lease payments under non-cancelable leases, including leases that are executed but not yet effective, as of March 31, 2023 are as follows, in thousands:
|
| Operating Leases |
|
| Finance Leases |
|
| Total |
| |||
Remainder of 2023 |
| $ | 1,645 |
|
| $ | 39 |
|
| $ | 1,684 |
|
2024 |
|
| 2,895 |
|
|
| 59 |
|
|
| 2,954 |
|
2025 |
|
| 1,739 |
|
|
| 12 |
|
|
| 1,751 |
|
2026 |
|
| 1,404 |
|
|
| 12 |
|
|
| 1,416 |
|
2027 |
|
| 789 |
|
|
| 6 |
|
|
| 795 |
|
Thereafter |
|
| 7,913 |
|
|
| 1 |
|
|
| 7,914 |
|
Total lease payments |
|
| 16,385 |
|
|
| 129 |
|
|
| 16,514 |
|
Less: Interest |
|
| 3,661 |
|
|
| 6 |
|
|
| 3,667 |
|
Present value of lease liabilities |
| $ | 12,724 |
|
| $ | 123 |
|
| $ | 12,847 |
|
Operating lease payments include $6.3 million related to optional lease extension periods for multiple leases that are not yet exercisable but are reasonably certain of being exercised.
The following table provides information about the remaining lease terms and Stock-Based Compensationdiscount rates applied:
|
| March 31, |
|
| September 30, |
| ||
Weighted average remaining lease term |
|
|
|
|
|
| ||
Operating leases |
| 11.32 years |
|
| 12.65 years |
| ||
Finance leases |
| 2.07 years |
|
| 2.45 years |
| ||
Weighted average discount rate |
|
|
|
|
|
| ||
Operating leases |
|
| 4.54 | % |
|
| 4.17 | % |
Finance leases |
|
| 4.17 | % |
|
| 4.17 | % |
7. Income Taxes
Income Tax (Benefit) Provision
Our effective tax rate was $0.3 million118.0% and 21.7% for the six months ended March 31, 2023 and 2022, respectively. The effective tax rate for the six months ended March 31, 2023 differs from the U.S. statutory tax rate of 21% primarily due to the release of a portion of our valuation allowance in bothconnection with a deferred tax liability related to the Entrepix acquisition resulting in recognition of previously recorded deferred tax assets. For the three months ended DecemberMarch 31, 20172023 and 2016,2022, we recorded an income tax benefit of $2.9 million and is included in selling, general and administrative expenses.
Options | Weighted Average Exercise Price | ||||||
Outstanding at beginning of period | 1,560,441 | $ | 7.95 | ||||
Granted | — | — | |||||
Exercised | (165,839 | ) | 7.03 | ||||
Forfeited | (27,299 | ) | 20.04 | ||||
Outstanding at end of period | 1,367,303 | $ | 7.82 | ||||
Exercisable at end of period | 1,142,012 | $ | 8.06 | ||||
Weighted average fair value of options granted during the period | $ | — |
17
Deferred tax assetsIncome Taxes and liabilities reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We recordValuation Allowance
GAAP requires that a valuation allowance if, based on the weight of available evidence,be established when it is more“more likely than notnot” that someall or a portion or all of a deferred tax assetassets will not be realized. Our expectations regarding realizationA review of our deferred tax assetsall available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is based upondifficult to conclude that a valuation allowance is not needed when the weightnegative evidence includes cumulative losses in recent years. Based on the considerations of all available evidence, including such factors as our recent earnings history, expected future taxable income and available tax planning strategies. In prior periods, we establishedhave concluded that we will maintain a full valuation allowances on substantiallyallowance for all net deferred tax assets after considering allrelated to the carryforwards of the available objective evidence, both positiveU.S. net operating losses and negative, historicalforeign tax credits. We will continue to monitor our cumulative income and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized.
We expect to pay minimal net effect to our provisionU.S federal cash taxes for income taxes and effective tax rate. We have not made any other provisional adjustmentsthe foreseeable future as a result of the Act.
8. Equity and tax credits thatStock-Based Compensation
Stock-based compensation expense was $0.2 million and $0.1 million in the three months ended March 31, 2023 and 2022, respectively, and $0.3 million and $0.2 million in the six months ended March 31, 2023 and 2022, respectively. Stock-based compensation expense is included in selling, general and administrative expenses.
The following table summarizes our stock option activity during the six months ended March 31, 2023:
|
| Options |
|
| Weighted |
| ||
Outstanding at beginning of period |
|
| 589,341 |
|
| $ | 8.06 |
|
Granted |
|
| 111,500 |
|
|
| 9.27 |
|
Exercised |
|
| (21,675 | ) |
|
| 5.01 |
|
Forfeited |
|
| (23,000 | ) |
|
| 10.81 |
|
Outstanding at end of period |
|
| 656,166 |
|
| $ | 8.27 |
|
Exercisable at end of period |
|
| 451,421 |
|
| $ | 7.52 |
|
Weighted average fair value of options granted during the period |
| $ | 4.81 |
|
|
|
|
The fair value of options was estimated at the applicable grant date using the Black-Scholes option pricing model with the following assumptions:
|
| Six Months Ended March 31, 2023 |
|
| Six Months Ended March 31, 2022 |
| ||
Risk free interest rate |
|
| 4 | % |
|
| 1 | % |
Expected term |
| 5 years |
|
| 5 years |
| ||
Dividend rate |
|
| — | % |
|
| — | % |
Volatility |
|
| 56 | % |
|
| 57 | % |
The following table summarizes our RSU activity during the six months ended March 31, 2023:
|
| Number |
|
| Weighted |
| ||
Nonvested at beginning of year |
|
| — |
|
| $ | — |
|
Granted |
|
| 23,421 |
|
|
| 9.56 |
|
Released |
|
| (3,000 | ) |
|
| 9.61 |
|
Forfeited |
|
| — |
|
|
| — |
|
Nonvested at end of period |
|
| 20,421 |
|
| $ | 9.55 |
|
18
2023 Stock Repurchase Plan
On February 7, 2023, our Board of Directors (the “Board”) approved a stock repurchase program, pursuant to which we may reducerepurchase up to $5 million of our outstanding Common Stock over a one-year period, commencing on February 10, 2023. Repurchases under the amount of related taxes payable. We expectprogram will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the accounting for this aspectrules and regulations of the ActSecurities and Exchange Commission; however, we have no obligation to repurchase shares and the timing, actual number, and value of shares to be complete byrepurchased is subject to management’s discretion and will depend on our stock price and other market conditions. We may, in the end of fiscal 2018. As of December 31, 2017, consistent with historical conclusions, our cash balances held in foreign locations are expected to be permanently reinvested outside the United States as the impactsole discretion of the Act on our current positionBoard, terminate the repurchase program at any time while it is not yet fully understood and is still under evaluation.
2022 Stock Repurchase Plan
On February 10, 2022, the Board approved a new stock repurchase program, pursuant to which we recorded income tax expensemay repurchase up to $5 million of $1.2 million. The differenceour outstanding Common Stock over a one-year period, commencing on February 16, 2022. Repurchases under the program will be made in our effective tax rate fromopen market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the U.S. statutory rate primarily reflects the impactrules and regulations of the mix of domestic and international pre-tax income and valuation allowance. In 2017SEC; however, we have no obligation to repurchase shares and the first quartertiming, actual number, and value of 2018, we reversed a portionshares to be repurchased is subject to management’s discretion and will depend on our stock price and other market conditions. We may, in the sole discretion of the valuation allowance related to net operating loss carryforwards whichBoard, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance. During the quarter ended March 31, 2022, we have determined will be utilized against net operating income in the current year.
9. Commitments and Contingencies
Purchase Obligations
– As ofLegal Proceedings and Other Claims – In fiscal 2014, our wholly owned subsidiary, Tempress Systems, Inc. (“Tempress”), entered into an agreement with the Energy Research Centre of the Netherlands (“ECN”), a Netherlands government-sponsored research institute, for a joint research and development project. Under the terms of the agreement, Tempress sold an ion implanter (“Equipment”) to ECN for $1.4 million. Both Tempress and ECN are performing research and development projects utilizing the Equipment at the ECN facilities. Each party to the agreement will have 100% rights to the results of the projects developed separately by the individual parties. Any results co-developed will be jointly owned. Tempress met its requirement to contribute $1.4 million to the project in the form of installation of the Equipment, acceptance testing, project meeting attendance, training, parts, and service, including keeping the Equipment in good condition and repair for the first two years of the agreement prior to fiscal 2017.
Employment Contracts
– We have employment contracts and change in control agreements with, and severance plans covering, certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. If severance payments under the current employment19
10. Reportable Segments
Amtech has two operating segments that are structured around the types of product offerings provided to our customers. In December 2008, Amtech and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”), entered into an Amended and Restated Rights Agreement (the “Restated Rights Agreement”) which amended and restatedaddition, the terms governing the previously authorized shareholder rights (each a “Right”) to purchase fractional shares of our Series A Participating Preferred Stock (“Series A Preferred”) currently attached to each of our outstanding shares of common stock, par value $0.01 per share. As amended, each Right entitles the registered holder to purchase from us one one-thousandth of a share of Series A Preferred at an exercise price of $51.60 (the “Exercise Price”), subject to adjustment. The Rights will expire 10 years after issuance and willoperating segments may be exercisable if (a) a person or group becomes the beneficial owner of 15% or more of our common stock or (b) a person or group commences a tender or exchange offer that would result in the offeror beneficially owning 15% or more of our common stock. The Final Expiration Date (as defined in the Restated Rights Agreement) is December 14, 2018.
Semiconductor
–We design, manufacture, sell and service thermal processing equipment and related controls for use by leading semiconductor manufacturers, and in electronics, automotive and other industries.Material and Substrate –
We produce consumables and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers, numerous types of crystal materials, ceramics and metal components.Information concerning our businessreportable segments is as follows, in thousands:
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net Revenues: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Semiconductor |
| $ | 22,047 |
|
| $ | 23,584 |
|
| $ | 38,934 |
|
| $ | 46,349 |
|
Material and Substrate |
|
| 11,263 |
|
|
| 3,972 |
|
|
| 15,934 |
|
|
| 7,670 |
|
| $ | 33,310 |
|
| $ | 27,556 |
|
| $ | 54,868 |
|
| $ | 54,019 |
| |
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Semiconductor |
| $ | 2,950 |
|
| $ | 3,368 |
|
| $ | 3,819 |
|
| $ | 5,725 |
|
Material and Substrate |
|
| 297 |
|
|
| 654 |
|
|
| 930 |
|
|
| 835 |
|
Non-segment related |
|
| (2,728 | ) |
|
| (1,427 | ) |
|
| (6,910 | ) |
|
| (2,725 | ) |
|
| $ | 519 |
|
| $ | 2,595 |
|
| $ | (2,161 | ) |
| $ | 3,835 |
|
|
| March 31, |
|
| September 30, |
| ||
Identifiable Assets: |
|
|
|
|
|
| ||
Semiconductor |
| $ | 75,879 |
|
| $ | 75,622 |
|
Material and Substrate |
|
| 70,143 |
|
|
| 22,032 |
|
Non-segment related* |
|
| 4,980 |
|
|
| 35,880 |
|
| $ | 151,002 |
|
| $ | 133,534 |
|
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Net Revenues: | ||||||||
Solar * | $ | 49,197 | $ | 11,424 | ||||
Semiconductor | 20,891 | 15,703 | ||||||
Polishing | 3,523 | 2,008 | ||||||
$ | 73,611 | $ | 29,135 | |||||
Operating income (loss): | ||||||||
Solar * | $ | 5,352 | $ | (1,023 | ) | |||
Semiconductor | 3,004 | 2,361 | ||||||
Polishing | 1,104 | 464 | ||||||
Non-segment related | (1,694 | ) | (1,982 | ) | ||||
$ | 7,766 | $ | (180 | ) |
* The financial statement of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment revenue.
December 31, 2017 | September 30, 2017 | ||||||
Identifiable Assets: | |||||||
Solar | $ | 76,794 | $ | 97,999 | |||
Semiconductor | 58,706 | 57,177 | |||||
Polishing | 5,912 | 5,078 | |||||
Non-segment related | 31,701 | 31,369 | |||||
$ | 173,113 | $ | 191,623 |
Goodwill and other long-lived assets
We review our long-lived assets, including goodwill, for impairment at least annually in our fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additional information on impairment testing of long-lived assets, intangible assets and goodwill can be found in NoteNotes 1 and 11 of our Annual Report on Form 10-K as amended, for the year ended September 30, 2017.2022.
20
11. Major Customers and Foreign Sales
During the threesix months ended
Our net revenues were tofrom customers in the following geographic regions:
|
| Six Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
United States |
|
| 33 | % |
|
| 21 | % |
Canada |
|
| 8 | % |
|
| 3 | % |
Other |
|
| 5 | % |
|
| 6 | % |
Total Americas |
|
| 46 | % |
|
| 30 | % |
China |
|
| 13 | % |
|
| 20 | % |
Malaysia |
|
| 9 | % |
|
| 9 | % |
Taiwan |
|
| 5 | % |
|
| 14 | % |
Other |
|
| 9 | % |
|
| 5 | % |
Total Asia |
|
| 36 | % |
|
| 48 | % |
Germany |
|
| 2 | % |
|
| 6 | % |
Austria |
|
| 6 | % |
|
| 9 | % |
Other |
|
| 10 | % |
|
| 7 | % |
Total Europe |
|
| 18 | % |
|
| 22 | % |
|
|
| 100 | % |
|
| 100 | % |
Three Months Ended December 31, | |||||
2017 | 2016 | ||||
United States | 7 | % | 18 | % | |
Other | 2 | % | 2 | % | |
Total North America | 9 | % | 20 | % | |
China | 71 | % | 26 | % | |
Malaysia | 3 | % | 17 | % | |
Taiwan | 2 | % | 12 | % | |
Other | 3 | % | 6 | % | |
Total Asia | 79 | % | 61 | % | |
Germany | 6 | % | 5 | % | |
Other | 6 | % | 14 | % | |
Total Europe | 12 | % | 19 | % | |
100 | % | 100 | % |
21
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included in Item 1, “Condensed Consolidated Financial Statements” in Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”) and our consolidated financial statements and related notes included in Item 8, “Financial“Item 8. Financial Statements and Supplementary Data” in our Annual Report on Form 10-K as amended, for the fiscal year ended September 30, 2017.
Overview
We operate in three reportable business segments: (i) Solar, (ii) Semiconductor and (iii) Polishing. In our Solar segment, we are a leading, global suppliermanufacturer of capital equipment, including thermal processing systems, including diffusion, plasma-enhanced chemical vapor deposition (“PECVD”), atomic layer deposition (“ALD”),and wafer polishing, and related automation, partsconsumables used in fabricating semiconductor devices, such as silicon carbide (“SiC”) and services,silicon power, analog and discrete devices, and electronic assemblies and modules focusing on enabling technologies for electric vehicles (EV) and clean technology (CleanTech) applications. We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe.
We operate in two reportable segments, based primarily on the solar photovoltaic industry.industry they serve: (i) Semiconductor and (ii) Material and Substrate. In our Semiconductor segment, we supply thermal processing equipment, including solder reflow equipmentovens, horizontal diffusion furnaces and related controls and diffusioncustom high-temp belt furnaces for use by leading semiconductor, electronics and electro/mechanical assembly manufacturers. Our semiconductor customers are primarily manufacturers of integrated circuits and optoelectronic sensors and discrete (“O-S-D”) components used in electronics assembly for automotiveanalog, power and other industries.radio frequency (“RF”). In our PolishingMaterial and Substrate segment, we produce substrate consumables, chemicals and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers numerous types of crystalline materials, ceramicsfor semiconductor products, sapphire wafers for LED applications, and metal components.
The solar cell and semiconductor industries areindustry is cyclical, but not seasonal, and historically havehas experienced significant fluctuations. Our revenue is impacted by these broad industry trends. The solar cell
Strategy
We continue to focus on our plans to profitably grow our business and have developed a strategic growth plan and a capital allocation plan that we believe will support our growth objectives. Our power semiconductor strategic growth plan leverages our experience, products and capabilities in pursuit of growth, profitability and sustainability. Our core focus areas are:
22
We anticipate future investments will be required to meet the expected demand from the growing markets we serve to achieve our revenue growth targets, including investments in research and development as well as capital expenditures, which also includes additional investments in capacity expansion, talent, and management information systems. In June 2022, we completed the sale of the complete cellreal property where our manufacturing processfacility in Massachusetts is located. In connection with this sale, we entered into a two-year leaseback of the facility. This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and advanced automation have contributed significantly to our success in securingsettlement of related sale expenses. During the large orderstwo-year leaseback period, we are exploring various options, including negotiating with the landlord for an extension of the first two phases oflease-back period and conducting a multi-phase turnkey project announced in January and April of 2017 fromsearch for a new solar cell manufacturermanufacturing facility more in China. For equipment orders that are not part of turnkey projects, we compete with Chinese equipment manufacturers that offer lower prices coupled with liberal payment terms. We are finding it more difficult to participate in the capacity expansions of those Chinese companies that already have significant experience with all facets of producing solar cells and at least some prior experience workingline with the localneeds of our Semiconductor product lines. In addition, we are evaluating business continuity and resiliency within our operations, our management information systems, and our needs in order to allow for greater efficiencies and to ensure our infrastructure can support our future growth plans. As a capital equipment vendors. Whilemanufacturer, we will continue to focus on developing advanced products and technologies, weinvest in our business to drive future growth.
In addition to investments in our organic growth, another key aspect of our capital allocation policy is our plan to seek further cost reductionsgrow through acquisitions. We have the expertise and track record to addressidentify complimentary and synergistic acquisition targets in the competition fromSemiconductor and SiC growth environments and to execute transactions and integrations to provide for value creating, profitable growth in both the short-term and long-term. On March 3, 2021, we acquired Intersurface Dynamics, a Connecticut-based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics. On January 17, 2023, we acquired Entrepix, an Arizona-based expert in CMP and wafer cleaning. As of the date of the filing of this Quarterly Report, we do not have an agreement to acquire any additional acquisition target.
COVID-19 Update
On March 28, 2022, the Chinese equipment vendors.
Cybersecurity Incident
On April 12, 2021, we detected a data incident in which attackers acquired data and will continue to be impacted by the timing of large system orders. Further, the solar and semiconductor equipment industries are highly cyclical and the conditionsdisabled some of the industriestechnology systems used by one of our subsidiaries. Upon learning of the incident, we operateimmediately engaged external counsel and retained a team of third-party forensic, incident response, and security professionals to investigate and determine the full scope of this incident. We also notified law enforcement officials and confirmed that the incident is covered by our insurance. We have completed the investigation of the data incident with assistance from our outside professionals, and indications were that the unauthorized third-party gained access to certain personal information relating to employees and their beneficiaries for some of our operations. There was no indication of any misuse of this information.
Despite this disruption, production continued in are volatile. Therefore, our order flow fluctuates quarterfacilities. Our previously disabled subsidiary network is now back up and running securely. Working alongside our security professionals, we were able to quarter. For additionalbring our subsidiary’s systems online with enhanced security controls. We have deployed an advanced next generation anti-virus and endpoint detection and response tool, as well as Managed Detection & Response services. We remain committed to protecting the security of the personal information regarding the risksentrusted to us and providing high-quality products and service to our customers.
We recorded approximately $1.1 million of expense related to this incident, which is included in selling, general and administrative expenses, during the third quarter of fiscal 2021. The expense is primarily related to third-party service providers, including security professionals as well as legal and response teams. We may make additional investments in the future to further strengthen our businesscybersecurity. We filed an insurance claim during the fourth quarter of fiscal
23
2021 related to the incident. During the second quarter of 2022, we signed a final settlement agreement with our insurer resulting in total reimbursement of approximately $0.6 million, which included $0.4 million received during the quarter ended December 31, 2021 and industry, please refer to Item 1A. Risk Factors in our Annual Report on Form 10-K,$0.2 million received during the quarter ended March 31, 2022. No portion of the reimbursement remains outstanding as amended, for the fiscal year ended September 30, 2017.
Results of Operations
The following table sets forth certain operational data as a percentage of net revenue for the periods indicated:
Three Months Ended | ||||||
December 31, 2017 | December 31, 2016 | |||||
Net revenue | 100 | % | 100 | % | ||
Cost of sales | 72 | % | 71 | % | ||
Gross margin | 28 | % | 29 | % | ||
Selling, general and administrative | 14 | % | 24 | % | ||
Research, development and engineering | 3 | % | 6 | % | ||
Operating income (loss) | 11 | % | (1 | )% | ||
Gain on sale of other assets | 0 | % | 0 | % | ||
Income (loss) from equity method investment | 0 | % | 0 | % | ||
Interest expense and other income, net | 0 | % | 0 | % | ||
Income (loss) before income taxes | 11 | % | (1 | )% | ||
Income taxes provision | 2 | % | 0 | % | ||
Net income (loss) | 9 | % | (1 | )% | ||
Add: net loss attributable to noncontrolling interest | 0 | % | 1 | % | ||
Net income (loss) attributable to Amtech Systems, Inc. | 9 | % | 0 | % | ||
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Cost of sales |
|
| 60 | % |
|
| 60 | % |
|
| 60 | % |
|
| 61 | % |
Gross margin |
|
| 40 | % |
|
| 40 | % |
|
| 40 | % |
|
| 39 | % |
Selling, general and administrative |
|
| 34 | % |
|
| 24 | % |
|
| 38 | % |
|
| 26 | % |
Research, development and engineering |
|
| 4 | % |
|
| 7 | % |
|
| 5 | % |
|
| 6 | % |
Severance expense |
|
| — | % |
|
| — | % |
|
| 1 | % |
|
| — | % |
Operating income (loss) |
|
| 2 | % |
|
| 9 | % |
|
| (4 | )% |
|
| 7 | % |
Interest expense and other, net |
|
| (1 | )% |
|
| — | % |
|
| (1 | )% |
|
| — | % |
Income (loss) before income taxes |
|
| 1 | % |
|
| 9 | % |
|
| (5 | )% |
|
| 7 | % |
Income tax (benefit) provision |
|
| (9 | )% |
|
| 2 | % |
|
| (6 | )% |
|
| 2 | % |
Net income |
|
| 10 | % |
|
| 7 | % |
|
| 1 | % |
|
| 5 | % |
Net Revenue
Net revenue consists of revenue recognized upon shipment or installationdelivery of equipment, with the exception of products using new technology, for which revenue is recognized upon customer acceptance.equipment. Spare parts sales are recognized upon shipment and service revenue is recognized upon completion of the service activity, which is generally ratable over the term of the service contract. Since the majority of our revenue is generated from large system sales, revenue, gross profit and operating income can be significantly impacted by the timing of system shipments, and recognition of revenue based on customer acceptances. The revenue of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and microelectromechanical (“MEMS”) industries, comprising less than 25% of the Solar segment revenue. shipments.
Our net revenue by operatingreportable segment was as follows, (dollarsdollars in thousands):
Three Months Ended December 31, | ||||||||||||||
Segment | 2017 | 2016 | Incr (Decr) | % Change | ||||||||||
Solar | $ | 49,197 | $ | 11,424 | $ | 37,773 | 331% | |||||||
Semiconductor | 20,891 | 15,703 | 5,188 | 33% | ||||||||||
Polishing | 3,523 | 2,008 | 1,515 | 75% | ||||||||||
Total net revenue | $ | 73,611 | $ | 29,135 | $ | 44,476 | 153% |
|
| Three Months Ended March 31, |
|
|
|
|
|
|
|
| Six Months Ended March 31, |
|
|
|
|
|
|
| ||||||||||||||
Segment |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||
Semiconductor |
| $ | 22,047 |
|
| $ | 23,584 |
|
| $ | (1,537 | ) |
|
| (7 | )% |
| $ | 38,934 |
|
| $ | 46,349 |
|
| $ | (7,415 | ) |
|
| (16 | )% |
Material and Substrate |
|
| 11,263 |
|
|
| 3,972 |
|
|
| 7,291 |
|
|
| 184 | % |
|
| 15,934 |
|
|
| 7,670 |
|
|
| 8,264 |
|
|
| 108 | % |
Total net revenue |
| $ | 33,310 |
|
| $ | 27,556 |
|
| $ | 5,754 |
|
|
| 21 | % |
| $ | 54,868 |
|
| $ | 54,019 |
|
| $ | 849 |
|
|
| 2 | % |
Total net revenue for the quartersthree months ended DecemberMarch 31, 20172023 and 20162022 was $73.6$33.3 million and $29.1$27.6 million, respectively, an increase of $44.5approximately $5.8 million or 153%21%. Our Semiconductor results for the second quarter of fiscal 2023 reflect a decrease in production from our Shanghai facility due to the industry cycle, partially offset by increases in our belt furnace production. Material and Substrate revenue increased due to the addition of Entrepix, effective January 17, 2023, as well as increased shipments of consumables resulting from capacity expansion and production increases by our customers. Entrepix accounted for approximately $6.3 million of revenue in the Material and Substrate segment during the quarter ended March 31, 2023.
Total net revenue for the six months ended March 31, 2023 and 2022 was $54.9 million and $54.0 million, respectively, an increase of approximately $0.8 million or 2%. Revenue from the SolarSemiconductor segment increased 331%decreased $7.4 million compared to the prior year quarter dueperiod. This change is primarily attributable to fewer shipments relating to Phase II of the turnkey order, previously announced in April 2017.across all our product lines, but primarily those from our Shanghai facility. Revenue from the Semiconductorour Material and Substrate segment increased 33% compared$8.3 million due to the prior year quarter due primarily to strong customer demand foraddition of Entrepix, effective January 17, 2023, and increased shipments of consumables resulting from capacity expansion and production increases by our thermal processing systemscustomers.
24
Orders and diffusion furnaces. Revenue from the Polishing segment increased 75% compared to the prior year quarter due primarily to strong customer demand leading to increased sales of polishing templates and equipment.
New orders booked in the quarterthree and six months ended DecemberMarch 31, 20172023 and 2022 were $37.3 million ($7.3 million Solar) compared to $34.7 million ($15.9 million Solar)as follows, dollars in thousands:
|
| Three Months Ended March 31, |
|
|
|
|
|
|
|
| Six Months Ended March 31, |
|
|
|
|
|
|
| ||||||||||||||
Segment |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||||||
Semiconductor |
| $ | 24,606 |
|
| $ | 28,039 |
|
| $ | (3,433 | ) |
|
| (12 | )% |
| $ | 45,690 |
|
| $ | 55,848 |
|
| $ | (10,158 | ) |
|
| (18 | )% |
Material and Substrate |
|
| 9,660 |
|
|
| 5,656 |
|
|
| 4,004 |
|
|
| 71 | % |
|
| 13,805 |
|
|
| 9,484 |
|
|
| 4,321 |
|
|
| 46 | % |
Total new orders |
| $ | 34,266 |
|
| $ | 33,695 |
|
| $ | 571 |
|
|
| 2 | % |
| $ | 59,495 |
|
| $ | 65,332 |
|
| $ | (5,837 | ) |
|
| (9 | )% |
Our backlog as of customer ordersMarch 31, 2023 and 2022 was as follows, dollars in the quarter ended December 31, 2016. The backlog of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment backlog.
|
| March 31, |
|
|
|
|
|
|
| |||||||
Segment |
| 2023 |
|
| 2022 |
|
| Change |
|
| % Change |
| ||||
Semiconductor |
| $ | 54,767 |
|
| $ | 50,352 |
|
| $ | 4,415 |
|
|
| 9 | % |
Material and Substrate |
|
| 11,071 |
|
|
| 3,214 |
|
|
| 7,857 |
|
|
| 244 | % |
Total backlog |
| $ | 65,838 |
|
| $ | 53,566 |
|
| $ | 12,272 |
|
|
| 23 | % |
As of DecemberMarch 31, 2017, two2023, one customer of both our Semiconductor and Material and Substrate segments accounted for 17% of our backlog. Additionally, three Semiconductor segment customers individually accounted for 19%16%, 15% and 14% of our backlog. No other customer accounted for more than 10% of our backlog.backlog as of March 31, 2023. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeedingfuture periods, nor is backlog any assurance that we will realize profit from completing these orders. Our backlog also includes revenue deferred pursuant to our revenue recognition policy, derived from orders that have already been shipped, but which have not met the criteria for revenue recognition.
Gross Profit and Gross Margin
Gross profit is the difference between net revenue and cost of goods sold. Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment and spare parts and the cost of service and support to customers for installation, warranty and paid service calls. Gross margin is gross profit as a percent of net revenue. Our gross profit and gross margin by operatingbusiness segment were as follows, (dollarsdollars in thousands):
Three Months Ended December 31, | ||||||||||||||||
Segment | 2017 | Gross Margin | 2016 | Gross Margin | Incr (Decr) | |||||||||||
Solar | $ | 11,313 | 23% | $ | 1,611 | 14% | $ | 9,702 | ||||||||
Semiconductor | 7,488 | 36% | 6,095 | 39% | 1,393 | |||||||||||
Polishing | 1,536 | 44% | 737 | 37% | 799 | |||||||||||
Total gross profit | $ | 20,337 | 28% | $ | 8,443 | 29% | $ | 11,894 |
|
| Three Months Ended March 31, |
|
| Six Months Ended March 31, |
| ||||||||||||||||||||||||||||||||||
Segment |
| 2023 |
|
| Gross |
|
| 2022 |
|
| Gross |
|
| Change |
|
| 2023 |
|
| Gross |
|
| 2022 |
|
| Gross |
|
| Change |
| ||||||||||
Semiconductor |
| $ | 8,931 |
|
|
| 41 | % |
| $ | 9,255 |
|
|
| 39 | % |
| $ | (324 | ) |
| $ | 15,103 |
|
|
| 39 | % |
| $ | 17,917 |
|
|
| 39 | % |
| $ | (2,814 | ) |
Material and Substrate |
|
| 4,539 |
|
|
| 40 | % |
|
| 1,905 |
|
|
| 48 | % |
|
| 2,634 |
|
|
| 6,670 |
|
|
| 42 | % |
|
| 3,141 |
|
|
| 41 | % |
|
| 3,529 |
|
Total gross profit |
| $ | 13,470 |
|
|
| 40 | % |
| $ | 11,160 |
|
|
| 40 | % |
| $ | 2,310 |
|
| $ | 21,773 |
|
|
| 40 | % |
| $ | 21,058 |
|
|
| 39 | % |
| $ | 715 |
|
Our gross margins can be affected by capacity utilization and the type and volume of machines and consumables sold each quarter. Gross profit for the three months ended DecemberMarch 31, 20172023 and 20162022 was $20.3$13.5 million (28%(40% of net revenue) and $8.4$11.2 million (29%(40% of net revenue), respectively, an increase of $11.9$2.3 million. Gross margin on products from our SolarSemiconductor segment increased slightly due to changes in our product mix and improved capacity utilization in our Billerica facility. Gross margin on products from our Material and Substrate segment decreased compared to the three months ended DecemberMarch 31, 2016,2022, due primarily to higher equipment sales, volumeswhich have lower margins than our consumables. We are experiencing increased material costs across all of higher-marginour segments and expect this trend to continue through at least the second half of fiscal 2023. In response to such increased costs, we continually review our pricing plans and supplier agreements, with the objective of passing these increased costs to our customers where possible; however, we continue to experience pricing pressure from our customers. Additionally, we have experienced rising labor costs across our divisions, and we expect this trend to continue, as the labor markets in which we operate remain competitive.
Gross profit for the six months ended March 31, 2023 and 2022 was $21.8 million (40% of net revenue) and $21.1 million (39% of net revenue), respectively, an increase of $0.7 million. Gross margin on products from our
25
Semiconductor segment remained flat compared to the first quarter of fiscal 2017.six months ended March 31, 2022. Gross profit on products from our Semiconductor segment increased due to increased sales volume in the first quarter of 2018, with gross margin decreasing due to product mix. Gross profit and gross margin on products from our PolishingMaterial and Substrate segment increased from the prior year period, primarily due to higher sales of new products with higher margins. For the three months ended December 31, 2017, we deferred gross profit of $2.1 million. For the three months ended December 31, 2016, we recognized previously-deferred gross profit of $0.3 million.
Selling, General and Administrative
Selling, general and administrative expenses (“SG&A”) consists of the cost of employees, consultants and contractors, facility costs, sales commissions, shipping costs, promotional marketing expenses, legal and accounting expenses and bad debt expense.
SG&A expenses for the three months ended DecemberMarch 31, 20172023 and 20162022 were $10.6$11.4 million and $7.0$6.8 million, respectively. SG&A increased compared to the prior year quarter due primarily to $1.8$1.9 million of higher commissions, freightadded SG&A from our acquisition of Entrepix and other selling$1.5 million of transaction expenses related to increased revenue. Also,the acquisition of Entrepix.
SG&A expenses for the threesix months ended DecemberMarch 31, 2016,2023 and 2022 were $20.6 million and $13.9 million, respectively. SG&A increased compared to the prior year period due primarily to $1.9 million of added SG&A from our acquisition of Entrepix, $3.0 million of transaction expenses were reduced byrelated to the collectionsacquisition of previously reserved accounts receivableEntrepix and $1.0 million of approximately $1.0 million.
Research, Development and Engineering
Research, development and engineering (“RD&E”) expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. WeRD&E expenses may vary from period to period depending on the engineering projects in process. Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E. However, from time to time we add functionality to our products or develop new products during engineering and manufacturing to fulfill specifications in a customer’s order, in which case the cost of development, along with other costs of the order, are charged to cost of goods sold. Occasionally, we receive reimbursements through governmental research and development grants which are netted against these expenses when certain conditions have been met.
RD&E expense, net of grants earned, for the three months ended DecemberMarch 31, 20172023 and 20162022 were $2.0$1.5 million and $1.6$1.8 million, respectively, an increaseand $2.9 million and $3.4 million in the six months ended March 31, 2023 and 2022, respectively. The decrease in RD&E is due to the timing of purchases related to specific strategic-development projects at our Semiconductor segment. Grants earned are immaterial in all periods presented.
Severance Expenses
We recorded severance expense of $0.4 million due primarilyin the six months ended March 31, 2023. This one-time charge relates to increased R&D spendingthe retirement of our founder, Mr. J.S. Whang. There was no severance expense recorded in our Solar segment.
Income Taxes
Our effective tax rate was 118.0% and 21.7% for the six months ended March 31, 2023 and 2022, respectively. The effective tax rate for the six months ended March 31, 2023 differs from the U.S. statutory tax rate of 21% primarily due to the release of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition resulting in recognition of previously recorded deferred tax assets. For the three months ended DecemberMarch 31, 20172023 and 2022, we recorded an income tax benefit of $2.9 million and income tax expense of $0.7 million, respectively. For the six months ended March 31, 2023 and 2022, we recorded income tax expensebenefit of $1.2$3.0 million resulting in an effective tax rate of 16.1%. For the three months ended December 31, 2016 we recordedand income tax expense of $0.1$0.8 million, a 37.5%respectively. The quarterly income tax provision is calculated using an estimated annual effective tax rate. The income tax provisions arerate, based upon estimates ofexpected annual income, annual permanent differencesitems, statutory rates and statutoryplanned tax ratesstrategies in the various jurisdictions in which we operate, except thatoperate. However, losses in certain loss jurisdictions and discrete items are treated separately.
Generally accepted accounting principles of the United States (“GAAP”) require that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review
26
of all available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. Therefore, in fiscal 2017, cumulative losses weighed heavily in
We expect to pay minimal U.S federal cash taxes for the foreseeable future as a result of our U.S. net operating losses that are carried forward.
Our future effective income tax rate depends on various factors, such as the amount of income (loss) in Europe.
Liquidity and Capital Resources
The following table sets forth for the periods presented certain consolidated cash flow information, in thousands:
|
| Six Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net cash used in operating activities |
| $ | (5,327 | ) |
| $ | (361 | ) |
Net cash used in investing activities |
|
| (36,474 | ) |
|
| (125 | ) |
Net cash provided by (used in) financing activities |
|
| 11,919 |
|
|
| (4,215 | ) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| 741 |
|
|
| 286 |
|
Net decrease in cash, cash equivalents and restricted cash |
|
| (29,141 | ) |
|
| (4,415 | ) |
Cash and cash equivalents, beginning of period |
|
| 46,874 |
|
|
| 32,836 |
|
Cash, cash equivalents and restricted cash, end of period |
| $ | 17,733 |
|
| $ | 28,421 |
|
Cash and September 30, 2017,Cash Flow
The decrease in cash and cash equivalents were $52.7 million and $51.1 million, respectively, an increase of $1.6 million. Restricted cash decreased by $14.7 million to $9.9 million at December 31, 2017 from $24.6 million at September 30, 2017. Our working capital was $79.7 million as2022 of December 31, 2017 and $71.1 million as of September 30, 2017.
During periods of weakening demand, we typically generate cash from operating activities. Conversely, we are more likely to use operating cash flows for working capital requirements during periods of higher growth. The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included the sale of equity securities, which includes common stock sold in private transactions and public offerings, the incurrence of long-term debt and customer deposits. Additionally, in January 2023, we entered into a credit facility, which includes a revolving line of credit with availability up to $8.0 million. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. We have never paid dividends on our common stock.
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Cash Flows from Operating Activities
Cash provided byused in our operating activities was $0.3approximately $5.3 million for the threesix months ended DecemberMarch 31, 2017,2023, compared to $3.5$0.4 million used in operationsoperating activities for the threesix months ended DecemberMarch 31, 2016, an improvement of $3.8 million.2022. During the threefirst half of fiscal 2023, we used cash to increase our inventory balances in preparation for shipments scheduled over the next four quarters and to pay the related accounts payable. During the six months ended DecemberMarch 31, 2017, cash2022, we increased our inventory balances in preparation for upcoming shipments scheduled through the next four quarters. Additionally, our accounts receivable increased during this period as most of our shipments occurred late in the second quarter and our customers generally have payment terms of 60-90 days.
Cash Flows from Investing Activities
Cash used in investing activities was primarily generated through net income adjusted for non-cash items of $7.4$36.5 million which was offset by other increases and decreases$0.1 million in operating assets, primarily related to the turnkey project. A significant portion of the revenue and related cash payments related to the turnkey project are deferred and restricted, respectively, until completion of the integration of the equipment and transfer of the technology. During the threesix months ended DecemberMarch 31, 2016,2023 and 2022, respectively. The fiscal 2023 amount consists primarily of cash was reduced by increasespaid for the acquisition of Entrepix. The fiscal 2022 amount consists solely of capital expenditures. We expect capital expenditures to increase throughout fiscal 2023 as we make targeted investments in accounts receivableour IT systems and restricted cash, offset by decreases in inventory.
Cash Flows from Financing Activities
For the threesix months ended DecemberMarch 31, 2017, $1.1 million of2023, cash provided by financing activities was $11.9 million, comprised of $1.2$12.0 million in borrowings on our term loan and $0.3 million of proceeds received from the exercise of stock options partially offset by $0.4 million in payments on long-term debt of $0.1 million.debt. For the threesix months ended DecemberMarch 31, 2016, $0.12022, $4.2 million of cash used in financing activities was primarily related tocomprised of $4.1 million of cash used for the repurchase of common stock and payments on long-term debt of $0.2 million netpartially offset by $0.1 million of borrowingsproceeds received from the exercise of less than $0.1 million.
Financing Facilities
Our debt balance as of March 31, 2023 was $11.7 million, including our finance lease obligations. Our credit facility contains various covenants customary for transactions of this type, including complying with a minimum Debt to EBITDA ratio, a Fixed Charge Coverage ratio and a Working Capital ratio (as defined in the agreements) and meeting quarterly and annual reporting requirements. The credit facility agreement contains customary affirmative and negative covenants and events of default for facilities of this type. At March 31, 2023, we were in compliance with all such covenants.
Off-Balance Sheet Arrangements
As of DecemberMarch 31, 2017,2023, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the Securities and Exchange CommissionSEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Contractual Obligations
Unrecorded purchase obligations were $26.4$23.5 million as of DecemberMarch 31, 2017,2023, compared to $34.4$20.0 million as of September 30, 2017,2022, an increase of $3.5 million.
In January 2023, we entered into a decreaseLoan and Security Agreement with UMB Bank. See Note 2 “Long-Term Debt” of $8.0 million due primarilyour condensed consolidated financial statements for a description of this agreement. There were no other material changes to reduced vendor commitments as we complete the first two phases of the large solar project. Approximately $5.2 million of the December 31, 2017 and $11.8 million of the September 30, 2017 contractual obligations were prepaid as of those datesincluded in the form of advances to vendors.
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Critical Accounting Estimates
"Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report discusses our condensed consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America.GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, income taxes, inventory valuation, accounts and notes receivable collectability, warranty and impairment of long-lived assets.goodwill. We base our estimates and judgments on historical experience, expectations regarding the future and on various other factors that we believe to be reasonable under the circumstances. The results of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
A critical accounting policyestimate is one that is both important to the presentation of our financial position and results of operations, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in Part I, Item 1A of our Annual Report on2022 Form 10-K, as amended, for the year ended September 30, 2017.10-K. We believe our critical accounting policiesestimates relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements.
We believe the critical accounting policiesestimates discussed in the section entitled “Item 7:7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on2022 Form 10-K as amended, for the fiscal year ended September 30, 2017 represent the most significant judgments and estimates used in the preparation of our consolidated financial statements. There have been no significantmaterial changes in our critical accounting policiesestimates during the threesix months ended DecemberMarch 31, 2017.
Business Combinations
We follow the acquisition method of accounting to record identifiable assets acquired and liabilities assumed in connection with acquired businesses at their estimated fair value as of the date of acquisition.
Identifiable intangible assets from business combinations are recognized at their estimated fair values as of the date of acquisition and consist of non-compete agreements, backlog, customer relationships, developed technology and tradenames. Determination of the estimated fair value of identifiable intangible assets requires judgment. The fair value of acquired identifiable intangible assets were estimated using various valuation methodologies. The multi-period excess earnings method was used to value the acquired developed technology and the distributor method for the acquired customer relationships. Both of these approaches are income-based methods, which required judgment in estimating appropriate discount rates, obsolescence, customer attrition, and remaining useful lives. The acquired intangible assets all had finite lives, ranging from one to ten years. The fair value of identifiable intangible assets acquired in connection with the Acquisition was $12.8 million. Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. See Note 3 “Acquisition” for additional information.
Impact of Recently Issued Accounting Pronouncements
For discussion of the impact of recently issued accounting pronouncements, see “Part I, Item 1:1. Financial Information” under “Impact of Recently Issued Accounting Pronouncements.”
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in our reported market risks, as described in “QuantitativeItem 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K, as amended, fortherefore, are not required to provide the year ended September 30, 2017.
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Item 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, including theour Chief Executive Officer (“CEO”) and theour Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as of DecemberMarch 31, 2017,2023, pursuant to Exchange Act Rules 13a-15(e) and 15(d)-15(e). Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures in place were effective.
Changes in Internal Control Over Financial Reporting
Except as described below, there have not been any changes in Amtech’sthe Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2017second fiscal quarter to which this report relates that has materially affected, or isare reasonably likely to materially affect, itsthe internal control over financial reporting.
As noted above, on January 17, 2023 we completed the acquisition of Entrepix. We are currently integrating Entrepix into our control environment. In executing this integration, we are analyzing, evaluating, and where necessary, making changes in controls and procedures related to the Entrepix business, which is expected to be completed in the year ended September 30, 2024.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For discussion of legal proceedings, see Note 9 to our condensed consolidated financial statements under “Part I, Item 1:1. Financial Information” under “Commitments and Contingencies.”
Item 1A. Risk Factors
We refer you to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” in our 2022 Form 10-K, which identifies important risk factors that could materially affect our business, financial condition and future results. We also refer you to the other informationfactors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” immediately preceding “Item 1. Condensed Consolidated Financial Statements” of this Quarterly Report. This Quarterly Report, youincluding the accompanying condensed consolidated financial statements and related notes, should carefully consider thebe read in conjunction with such risks and other factors discussed in Part I, Item 1A “Risk Factors”for a full understanding of our Annual Report onoperations and financial condition. The risks described in our 2022 Form 10-K and any described herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. Except as amended, for the fiscal year ended September 30, 2017. Thereset forth below, there have been no material changes to the risk factors previously disclosed in our 2022 Form 10-K, as amended, for the fiscal year ended September 30, 2017, other than as described10-K.
We maintain cash deposits in the Overview above, and the supplemental risk factor set forth below:
We maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks that exceed the FDIC insurance limits. We also maintain cash deposits in foreign banks where we operate, some of which are not insured or are only partially insured by the FDIC or similar agencies. Bank failures, events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, or concerns or rumors about such events, may lead to liquidity constraints. The failure of a bank, or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, could adversely impact our liquidity and financial performance. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions, or by acquisition in the event of a failure or liquidity crisis.
Restrictive covenants in the agreements governing our indebtedness could restrict our operating flexibility.
The agreements governing our indebtedness limit our ability to take certain actions. These restrictions may limit our ability to operate our businesses, prohibit or limit our ability to enhance our operations or take advantage of potential business opportunities as they arise and cause us to take actions that are not favorable to shareholders.
The agreements governing our indebtedness restrict, among other things and subject to certain exceptions, our and our restricted subsidiaries’ ability to:
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Our ability to comply with the covenants and restrictions contained in the credit facility agreement may be affected by economic conditions and by financial, market and competitive factors, many of which are beyond our control. Our ability to comply with these covenants in future periods will also depend substantially on the pricing and sales volume of our products and services, our success at implementing cost reduction initiatives and our ability to successfully implement our overall business strategy. The breach of any of these covenants or restrictions could result in a default that would permit our lender to declare all amounts outstanding the credit facility agreement to be due and payable, together with accrued and unpaid interest. In that case, we may be unable to borrow under our credit facility agreement or otherwise, may not be able to repay the amounts due under the credit facility agreement, and may not be able to make cash available by dividend, debt repayment or otherwise. In addition, our lender could proceed against the collateral securing that indebtedness. Any of the foregoing could have serious consequences to our financial position, results of operationoperations or cash flows and create the risk thatcould cause us to become bankrupt or insolvent.
If we do not generate sufficient cash flows, we may neednot be able to adjustservice all of our accountingindebtedness.
To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash, make scheduled payments or to refinance our debt obligations depends on our successful financial and operating performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control.
If our cash flow and capital resources are insufficient to fund our debt service obligations or to repay indebtedness when it matures, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or operations, reducing or delaying capital investments or seeking to raise additional capital. We may not be able to refinance our debt and any refinancing of our debt could be at higher interest rates and may require us to comply with more restrictive covenants that could further restrict our business operations and our ability to make cash available for these changes.
Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms could have international tax consequences for businesses like ours that operate internationally. The Act is unclear in certain respects and will require interpretations and implementing regulations by the Internal Revenue Service, as well as state tax authorities, and the Act could be subject to amendments and technical corrections, any of which could lessen or increase thea material adverse (and positive) impacts of the Act. The accounting treatment of these tax law changes is complex, and some of the changes may affect both current and future periods. Others will primarily affect future periods. As discussed elsewhere in this Quarterly Reporteffect on Form 10-Q, we believe our analysis and computations of the tax effects of the Act on us is partially, but not entirely, complete. For instance, we are still in the process of analyzing the earnings and profits and tax pools of our foreign subsidiaries to estimate the effects of the one-time repatriation transaction tax on certain net accumulated earnings and profits of our foreign subsidiaries. Consistent with guidance from the Securities and Exchange Commission,business, including our financial statements reflect our estimatescondition and results of the tax effects of the Act on us as of December 31, 2017, to the extent we have been able to make such preliminary determinations. Although we believe these estimates are reasonable, they are provisional and may be adjusted prior to the end of fiscal 2018. We intend to complete accounting for the Act by the end of fiscal 2018. Any adjustments to our provisional estimates or the effects of currently unknown impacts of the Act on us could affect our current or future financial statements, or both.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On February 7, 2023, the Board approved a stock repurchase program, pursuant to which the Company may repurchase up to $5 million of its outstanding Common Stock over a one-year period, commencing on February 10, 2023. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately
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negotiated transactions, or by other means in compliance with the rules and regulations of the Securities and Exchange Commission; however, the Company has no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on the Company’s stock price and other market conditions. The Company may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance.
During the three months ended March 31, 2023, we did not repurchase any of our equity securities nor did we sell any equity securities that were not registered under the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
EXHIBIT | INCORPORATED BY REFERENCE | FILED | ||||||||||
NO. | EXHIBIT DESCRIPTION | FORM | FILE NO. | EXHIBIT NO. | FILING DATE | HEREWITH | ||||||
31.1 | X | |||||||||||
31.2 | X | |||||||||||
32.1 | X | |||||||||||
32.2 | X | |||||||||||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||
101.PRE | Inline Taxonomy Presentation Linkbase Document | X | ||||||||||
101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | X | ||||||||||
101.LAB | Inline XBRL Taxonomy Label Linkbase Document | X | ||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | X |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMTECH SYSTEMS, INC.
By | /s/ Lisa D. Gibbs | Dated: | May 10, 2023 | |||
Lisa D. Gibbs | ||||||
Vice President | ||||||
(Principal |
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